Consumers organising a pension, mortgage, insurance or general financial planning much prefer to have independent financial advice, according to a new report from Axa.

Forty-four per cent of UK adults see  independent financial advice as much preferable to a bank adviser or an accountant, when choosing financial products, the research showed. Advice from a tied adviser in a bank was preferred by just 35% of consumers, with 11% saying they would approach their accountant.

The benefits of independent financial planning advice have been quantified and highlighted in various reports recently, but perhaps the most important single finding was that consulting an independent financial adviser for mortgage advice will, on average, save you £962 per year on your mortgage repayments*.

By seeking financial advice from an independent source, your financial planning is based on looking at the whole market, whereas an adviser at a bank or building society is ‘tied’ in that they can advise only on the small range of products they sell. Financial planning advice on mortgages at a bank or building society is based, on average, on a range of just 20 mortgages, compared to the many thousands that can be compared by an independent financial adviser, when making his recommendations.

The report is the 5th annual Axa ‘Retirement Scope Research’ report based on interviews with 500 working consumers aged 25-59 and 500 retired consumers aged 55-75.

*”The Value of Mortgage Advice” by the Association of Mortgage Intermediaries (AMI)

Consumers who would never dream of cutting their own hair will happily ’have a go’ at sorting their own finances without expert financial advice.

While 38% of us would turn to an expert for ‘cutting or dying hair’, and 60% of us would call an expert to repair our car, only 14% of those between 50 and 70 would turn to an expert for help with pension planning, according to a new survey*.

In other areas of our financial planning, we show an equal tendency towards being ‘advice shy’. Only 32% of people would seek help in arranging their mortgage, only 24% would ask for expert financial planning advice on tax matters, and only 23% would ask for qualified investments advice.

People are more likely to consult a hairdresser, an electrician, a plumber, or hire in a painter and decorator than make a financial plan on the basis of qualified financial planning advice, the research revealed.

Younger people are more open to seeking help with their financial plan than older people. While only the 14% of people in their 50s and 60s (mentioned above) would seek financial advice on their pension planning, this figure rises to 29% for people in their 20s and 30s.

The percentage of people in their 20s who would seek financial advice on buying a mortgage is 52%.

“Seeking independent financial advice on your finances, whether it be mortgages, retirement or savings and investments, is an invaluable step in making sure you are getting the right advice and the best solutions, both for you and your family’s financial requirements,” said Karen Barrett, chief executive of unbiased.co.uk..

“It is understandable that people may naturally shy away from the often daunting task of sorting out their finances, but by using an independent financial adviser, you can entrust an expert to research the whole of the market and make specific recommendations for your individual circumstances.”

*Source: financial advice researcher unbiased.co.uk / Opinium Research survey of 2.065 UK adults

First time buyer mortgages can be both intimidating and confusing, as the homeseeker will most likely be unfamiliar with the whole home buying process.

Here are the top tips you need to know, for finding the best first time buyer mortgage deals and moving on to obtain your first time buyer mortgage.

Take independent financial advice

By taking independent mortgage advice, you will, on average, end up paying £962 per year less in mortgage repayments, according to research by the Association of Independent Mortgage Intermediaries (AMI). An independent mortgage adviser can compare all of the first time buyer mortgages on the market, to find you the best UK mortgage deals. An adviser employed by or affiliated to a single lender, on the other hand, can offer only a handful of first time buyer mortgage deals.

Maximise your first time buyer mortgage deposit

Obvious, perhaps. But what does ‘maximise’ mean, at the moment? In a nutshell, and generally speaking, only a deposit of 20 – 25% of your first time buyer mortgage will get you the attention of the larger lenders. However, much better first time buyer mortgage deals are available, and an independent adviser can locate them for you.

Establish your borrowing credentials

You can prove you are a responsible and reliable borrower by producing documentation proving you have had and repaid other borrowings, such as a credit card. Particularly important in relation to first time buyer mortgage deals, as you may be an ‘unknown quantity’ to lenders.

Clarify any blots on your copybook

If you have missed any loan repayments of any kind in the past, ensure that the explanation for the arrears is clear to your potential first time mortgage lender, especially if there were good reasons for your default. Otherwise the lender may assume that you were simply careless, or unwilling to pay.

Have your bank on your side, when seeking a first time buyer mortgage

Your bank will be happy to provide a credit reference that will go a long way towards showing that you are a responsible customer.

Be aware of hidden costs in first time buyer mortgages

First time buyers are often unaware of the extra costs that apply to taking a first time buyer mortgage.  These may include a survey costing from £50 to £1,000, depending on the level of detail; solicitors fees of up to £1,000 for a basic service (and more if there are complications); a local, environmental and water search costing £200-300; and stamp duty applicable at 1% on all homes over £250,000, although this threshold is currently (spring 2010) under review.

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Find out about first time buyer mortgages!

On this website you can read all about first time buyer mortgages, make a mortgage enquiry. To speak to us, or arrange quality independent mortgage advice call freephone 0800 678 5929 now.

Banks and building societies in many of the 27 EU countries are now offering consumers special deals on one savings product or investment, provided that they also sign up for additional services or an additional investment at the same time. However, such “tied” deals involving 2 linked products are not always in the best interests of the consumer, according to the EU, and investments advice from an independent investment planner is essential, to evaluate the overall benefit.

In the UK and throughout the EU, the most common such deal relates to bank current accounts, offered only if a salary is lodged into the account each month. However, mortgages and loans are also widely-used as ‘gateway’ products to sign customers up for additional business. In many instances, consumers are required by their investment adviser to sign up for an extra credit card, when seeking a loan.

In the UK, one such example of a tied product is Yorkshire Building Society’s attractive rate of 6% on investments in its Combination Bond, which is available only if you simultaneously invest the same amount in a Legal & General investment bond.

Santander and Saffron Building Society also offer tied deals, but stress that this happens only in conjunction with investments advice to their customers. However, since the investment planner giving the investments advice is an employee of the lender, there is no independent aspect to the investments advice received.

The result may be that the customer sets up an investment in a bond product which they otherwise might have neither sought nor taken, and the value of which can fall as well as rise, the EU concluded.

Another potential disadvantage of tied products is that they form a double link, which limits the customer’s freedom to switch to another lender. The EU estimates that investment advice which leads customers to take on tied products has created a total of 572 million contracts which would be switched, if the customer were not tied and felt they had greater mobility.

The EU report criticised lenders offering tied products for imposing ”choice distortion” on consumers, by limiting their options in the marketplace, and called the condition of having to take an additional product or service a “coercion factor” resulting in an investment decision that otherwise might not have been made.

Independent investment advice by a qualified investment planner capable of a full market overview may help the consumer evaluate the overall benefits and risks associated with such two-part tied deals.

These were the main areas where consumers sought independent financial advice in 2009, according to latest data from IFA Promotions*.

How are consumers using independent financial advice?

•  Pensions and Retirement Planning 

In December 2009, advice on pensions and ‘Personal Retirement Planning’ accounted for 37% of all enquiries received, compared with 27% at the beginning of 2009. 

• Investments and Savings 

Enquiries on savings and investments accounted for 28% of all requests in December. 

• Mortgages

Mortgage advice accounted for 8% of enquiries during the test period, perhaps less than expected due to the relatively subdued mortgages market last year. 

• ISAs 

Advice on Individual Savings Accounts (ISAs) brought in 8% of enquiries for independent advice, as consumers looked to take advantage of tax-free savings and use up the individual ISA allowances of £7,200 for the year (£10,200 for those over 50)

Other advice drivers included tax planning (6%), insurance and personal protection (4%), investment trusts (3%), equity release (3%), and saving for children (3%).

While the latest data notes minor shifts in investor priorities, the advantages of consulting an independent financial adviser never change, according to Karen Barrett, Chief Executive of IFA Promotions.

“An IFA can give you specialist advice on specific product areas and can recommend solutions from a cross the whole of the market, rather than just a selection of providers,” she said. 

*Report based on analysis of 350,000 consumer requests for independent financial advice through IFA Promotions/Unbiased.co.uk  in 2009

Consumers feel confused and daunted by the prospect of comparing products, when shopping around for mortgages and personal pensions, according to a new survey published this week by the retail industry watchdog Consumer Choice*.

Consumers were asked for their detailed impressions and experiences of 45 consumer product sectors, including electronics, white goods, utilities, and financial services.

In a ranking of the 45 sectors, consumers listed mortgages as a product where it was extremely difficult to compare prices (ranking: 9^th from bottom) and where they perceived there was an extremely limited choice of products available (ranking: bottom of list).

The inability to compare mortgage deals highlights the need for guidance by an independent financial adviser capable of taking a ‘whole of market’ approach when providing mortgage advice, and providing precise calculations of monthly mortgage repayments.

The perception that the choice of mortgages available is limited may be a consequence of taking ‘tied’ financial advice from one of the high street lenders, who inform customers only about their own in-house product range. In reality, the mortgages market offers many hundreds of mortgage deals, from a wide range of suppliers.

While tied financial advisers have on average only 20 of these products in their range, independent financial advisers can access the whole range of mortgages on the market,  to locate the best deal for their client.**

Pension advice needed

Personal pension plans came second from bottom out of 45 products on ease of comparing price, and 7^th from bottom for choice, the survey revealed.

“Perhaps consumers find differentiating between supplier’s offerings in these markets difficult, or perceive that there is a certain ‘sameness’ about pension suppliers in the market – that ‘there’s not much to choose between them’”, said Consumer Choice in relation to both home mortgages and private pensions.

The other goods and services that came in the bottom 9 for ease of price comparison were home maintenance services, veterinary services, personal banking, vehicle repairs, fixed line telephone services, gas/electricity, and professional services.

*Source: “2009 Consumer Conditions Survey” of 5,862 British adults by Ipsos Mori on behalf of Consumer Focus, published December 2009. Research carried out in March/April 2009

** Source: report “The Value of Mortgage Advice”, Association of Mortgage Advisers, 2009

While mortgage referrals earn lucrative commissions for estate agents, their in-house mortgage advisers typically deal with a limited panel of selected mortgage lenders.

In consequence, customers may be advised on only a small portion of mortgage deals available, and denied access to independent, ‘whole-of-market’ mortgage advice – potentially adding thousands of pounds to their annual mortgage costs.

Of those homebuyers who went with their estate agent’s mortgage adviser, 5% did so because they were told this was compulsory, and another 5% did so because their estate agent told them it would be cheaper or faster to use his recommendations and ‘tried very hard’ to persuade them, according to the report.

Of all homebuyers in the survey who had been passed to third party service providers, 18% felt they had been subjected to a ‘hard sell’ by their estate agent in relation to mortgage advice, insurance products, surveyors or solicitors, the Office of Fair Trading revealed.

Going with a tied adviser, as opposed to an independent mortgage adviser who can look at the whole mortgage market, can add on average £962 per year to the cost of a mortgage.**

Independent mortgage advice results in a better deal in 90% of cases, when compared with dealing with a tied mortgage adviser.

An independent mortgage adviser taking a ‘whole of market’ approach can potentially access many thousands of mortgage products, whereas a typical ‘tied’ adviser has access to a range of just 20 mortgages. 

*”Home Buying and Selling Market Study 2009” Office of Fair Trading, November 2009. Crown Copyright

**Report ‘The Value of Mortgage Advice’, Association of Mortgage Intermediaries, 2009

The need to take whole of market mortgage advice with access to all mortgage products has been emphasised yet again this month.

A new survey* reveals that 2.5m UK home owners are currently ‘trapped’ in their present home, because they had to shelve plans to move up the property ladder for financial reasons.

One in 5 (22%) of those who wanted to move could not do so because they were unable to obtain an affordable mortgage deal on the home they wanted.

However, consulting an independent financial adviser / indepdendent mortgage adviser, has been shown** to trim down the cost of a mortgage by an average of £962 per year, and results in a more affodable mortgage deal in 90% of cases, when compared with dealing directly with a high street lender.

An independent financial adviser offering whole of market mortgage advice can potentially access 19,000 mortgage products, while a typical ‘tied’ adviser employed by one of the high street lenders has access to a range of just 20 mortgages.

With the recent slump in the property market, one in 4 homeowners* were unable to move because they could not find a buyer for their existing home, at the price they wanted. This figure rises to 1 in 3 for homeowners over the age of 55.

Fourteen per cent of homeowners have been unable to move because they were unable to afford the mortgage deposit on their new home. This is a particular problem for the 18-24 age group, where the figure rises to 23%.*

*Opinium Research poll of 2,026 UK adults, 2009, published by Unbiased.co.uk

**Report ‘The Value of Mortgage Advice’, Association of Mortgage Intermediaries, 2009